Malaysia’s state-owned Petronas has made an 11th-hour public commitment to dramatically expand its proposed natural gas export plant on Canada’s West Coast if Ottawa approves its $6-billion takeover of Progress Energy Resources Corp.

The Canadian government is in the final stages of negotiating with both Petronas and Progress, as well as with China’s CNOOC Ltd. over its planned acquisition of Nexen Inc. The government’s decisions could come as early as this week.

In making its ruling, Ottawa also plans to release a new foreign investment framework that aims to achieve two competing goals: attracting international capital, including from state-owned companies, to help develop the country’s rich resource sector, while reassuring Canadians that it will not allow foreign governments to gain control of strategic sectors.

In order to win approval by the federal government, the deals must be found as being a “net benefit” to Canada under the Investment Canada Act. Ottawa has kept a tight lid on its deliberations.

On Tuesday, Petronas said the fate of its takeover attempt will determine the size of its long-planned investment in the liquefied natural gas project in British Columbia.

If the takeover goes through, Petronas says it will build a plant that could export as much as 18 million tonnes a year of liquefied natural gas.

If it is turned down, the plant will start at 7.6 million tonnes, with a potential expansion to 11.4 million tonnes.

Progress chief executive officer Michael Culbert said in an interview that the difference in size is a result of the current corporate relationship between the two companies.

That relationship includes a joint venture that holds 20 per cent of Progress’s natural gas fields. Those fields simply don’t have enough gas to support the larger project, Mr. Culbert said.

Depending on the size of what’s built, the price tag will run between $9-billion and $11-billion, the companies said. Mr. Culbert made clear that the partners prefer to build the larger project. (Figures compiled by engineering and construction firm Bechtel suggest the numbers could be much higher, ranging as high as $22.5-billion.)

“To build a facility that’s 50 per cent larger – a good portion of the base project itself, the costs are the same. You just get more output, and that obviously improves the economics,” he said. “And this is a global market that we’re going into, so improving the economics is critical.”

The companies have now completed a feasibility study and have moved into early engineering. Mr. Culbert argued that the timing of the announcement, in what are likely the final days of federal consideration of the deal, was not strategic, but coincidental.

The federal government turned down the Petronas bid in late October as not being a benefit to the country, but invited the company to re-apply and provide more commitments to clear that hurdle.

According to people familiar with Ottawa’s plans, the government intends to provide some clarification of its opaque policies about job, investment and other commitments it expects from foreign acquirers when they seek to acquire major Canadian companies, especially as they related to state-owned enterprises.

These commitments, known as undertakings, are negotiated in private and sources said Ottawa is expected to signal that it wants long-term commitments from acquirers that they will protect jobs and expand capital investments in Canadian operations.

However, one source close to negotiations said Prime Minister Stephen Harper is unlikely to lay out clear prescriptions that would tie the government’s hands in future takeover negotiations.

Many international investors are now looking for signs that Ottawa welcomes foreign investment, including from state-owned companies, said Yuen Pau Woo, president of the Asia-Pacific Foundation of Canada. He noted that Ottawa has now turned down three foreign takeovers, including Petronas, BHP Billiton PLC’s proposed acquisition of Potash Corp. and a U.S. bid for the space division of technology company MacDonald Dettwiler and Associates Ltd.

“I think the benign interpretation of the constructively ambiguous net benefit test has now given way to a more malignant interpretation,” Mr. Woo said. “And the government has to correct that impression, and bend over backwards to correct that impression.”

On the Petronas LNG project, Mr. Culbert said there is no guarantee the investment will happen, and construction of the export terminal has not been included as a formal undertaking to Investment Canada.

Still, moving to engineering phase is an important step forward for the project and for B.C. The province has high hopes that multibillion-dollar LNG plants will stir substantial new economic activity, both on the coast where they will be built, and in the province’s northeastern gas fields, where activity has been dwindling amid low gas prices.

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